TEXT: COMMERCE OFFICIAL SAYS COST OF CORRUPTION TOO HIGH

(Lays out mechanism to punish bribe-paying companies) (2110)
Washington -- A lawyer for the U.S. Commerce Department says the
treaty outlawing bribery of foreign officials has won approval from
the Organization for Economic Cooperation and Development because of a
growing realization that the costs of corruption are too high for
developing and developed countries.
The chief counsel for international commerce at the Commerce
Department, Eleanor Roberts Lewis, says the treaty provides a
mechanism in each of the treaty signatories to allow its prosecutors
to punish companies that pay bribes to foreign officials.
The text of the Lewis interview appears in the current issue USIA's
Economic Perspectives, which can be found on the Internet at
http://www.usia.gov/journals/ites/1198/ijee/ijee1198.htm.
(Following is the text of the Lewis interview)
(Note: in text, "billion" means 1,000 million)
(begin text)
The OECD Anti-Corruption Treaty: Why Is It Needed, How Will It Work?
An Interview With Eleanor Roberts Lewis, Chief Counsel for
International Commerce, U.S. Department of Commerce.
Question: Why does the United States consider the OECD anti-corruption
treaty to be so important?
Lewis: In the late 1970s, the United States passed a law called the
Foreign Corrupt Practices Act, which prohibited U.S. companies from
bribing foreign government officials. Our Justice Department has
strictly enforced that statute so that, in general, U.S. companies are
not involved in giving bribes. We had thought at the time that other
countries would follow us, and we worked through the United Nations
and other organizations to encourage them to pass similar laws. They
did not. The companies of other countries have continued to bribe
foreign officials, and where significant bribes are given, people get
the business. U.S. companies are losing billions of dollars a year in
business because of this unlevel playing field. We have been working
for 10 years in the OECD with other developed countries to try to
reach an agreement that no country would allow its firms to pay bribes
anymore.
Q: Other than make it easier for U.S. firms to get business, what is
this treaty intended to accomplish?
Lewis: It is important from the point of view of good governance and
economic development. Bribes are contaminating developing countries,
into which they are mostly paid. Bribery creates a situation that
corrupts the governments of these countries, causes dislocations
within their economic systems, and often results in the inappropriate
allocation of development aid given to these countries. Even though we
at the Commerce Department are focused mainly on the effect of the
treaty on U.S. business, there are definitely other effects that we
should be very concerned about.
Q: On the surface, it appears that U.S. business shows little
enthusiasm for this international anti-corruption accord. How do you
assess support for the treaty among U.S. businesses and foreign
businesses?
Lewis: As far as the United States is concerned, there is a lot of
business support, but companies are reluctant to come forward
individually because they feel the topic is so sensitive. It's a
little like the anti-boycott act and some of our sanctions treaties;
people are afraid that if they address the topic, it looks like
they're corrupt or there's something wrong with them. So mostly
they've been addressing it through certain organizations. For example,
the Business Roundtable and the National Association of Manufacturers
-- both major U.S. business groups -- have written letters to the U.S.
Senate and the U.S. House of Representatives strongly endorsing the
treaty.
U.S. companies support the treaty because they know they're losing
business as the result of bribery. When they bid for a procurement
contract with a developing country government, their European and
Asian competitors can come in and offer multimillion dollar bribes.
U.S. companies know they can not do that under U.S. law.
Now not all foreign governments support the OECD treaty, for obvious
reasons. Their companies have been winning a lot of contracts during
the last 20 years. We have had to strongly urge some foreign
governments to sign this convention. But I think things are changing
for a several reasons. One is that a number of key countries have had
serious domestic political corruption scandals that may have made them
think twice about publicly objecting to the treaty from the point of
view of their constituencies at home. Also, some of their companies
have decided that the price has gotten awfully high. Some developing
country officials have upped the ante, are asking for more and more
money and a higher and higher percentage of the contract. Instead of 1
percent or 5 percent, a few hundred thousand dollars or a million
dollars, we're seeing bribes of 20, 30, 40 million dollars. I mean,
really big dollars. It's cutting into the bottom line of some of these
foreign companies. I think some of them have gone to their governments
and said, "Hey, if we could all join hands and cut this out together,
we would prefer it too."
Q: Critics of this treaty say it is an attempt by the United States to
impose its version of corporate morality around the world. Could you
respond to that?
Lewis: I don't think I could totally deny that. It's not only
corporate morality, it's a little bit of good governance morality. We
feel very strongly that official corruption is bad for many reasons.
As a country that is supposed to be leading in the world, not only
militarily but also in economic issues, it is appropriate for the
United States to encourage people to line up behind rules that support
good governance and appropriate trading and investment relations.
We've done that in a lot of other areas. You could say the whole GATT
(General Agreement on Tariffs and Trade) was a U.S. government
initiative, really. Many of the rules we have today in the
international economic arena are the result of our offering and
encouraging and pushing people to set up international relations
somewhat the way they do their domestic relations. Under rule of law,
instead of having everybody running around like wild and crazy
cowboys, you have people or governments or companies working together
under agreed-on sets of standards. It regularizes and stabilizes
international economic relations. I use the word stabilize very
intentionally; our view is that a significant factor in the Asian
economic crisis was corruption and cronyism in the governments and the
companies and the banks of the countries that are now suffering
terribly under this crisis. We'd like to offer an approach that we
think is healthier and more stable for everyone.
Q: How is the OECD treaty going to be monitored and implemented?
Lewis: In the OECD, there is a bribery working group that negotiated
the treaty. Every member of the OECD plus some outsiders who wanted to
join the treaty (Argentina, Brazil, Bulgaria, Chile, and Slovakia) has
a seat at the table. Once the treaty goes into effect, that group will
begin a multiyear monitoring program. I emphasize multiyear because I
realize that this is not a magic wand that will make all corruption go
away next February.
The bribery working group will start by reviewing all the implementing
legislation of all the countries that have ratified the treaty. If we
feel some legislation is inadequate, we'll ask countries to improve
it. Then we're going to use a peer-review mechanism. We will send
teams of experts, mostly criminal prosecutors, to visit each country
and see what organizational and physical mechanisms have been set up
to enforce the law. Where are they located in their justice ministry?
Is somebody in charge of enforcement? What investigative mechanisms
and budget have been allocated to anti-bribery efforts? Once that
phase is done, we're going to watch as countries bring cases. We have
agreed to cooperate on prosecutions and to share information with each
other. Let's say a U.S. company comes to the U.S. government and says,
"We believe we have good information about bribes in X developing
country, and three or four European firms are involved in giving these
bribes." If we feel that there is supporting information, we may give
it to the European governments involved and take it to the OECD
working group and say, "The next time your peer review team visits
those countries, follow through and find out what they did with that
information. Did they investigate? Did they indict? Did they
prosecute?"
Q: What gives you confidence that this is going to work?
Lewis: One thing that encourages me is that, during the negotiations,
I talked with a lot with the prosecutors from many of the countries
involved. They were part of their countries' negotiating teams. It
turns out that prosecutors everywhere around the world are pretty much
alike. They are used to prosecuting companies from their own
countries. That's what they do for a living, unlike a trade ministry
that is used to supporting and promoting its business people. It is
possible that as soon as these local laws go into effect, assuming
that they are adequately drafted, anti-bribery prosecutions will
start. That was the experience of our Justice Department here in the
United States. Our law was passed in 1977. By 1978, we had some
prosecutions and some people paying fines. I think that will happen in
a number of countries.
Q: Is there any danger that one country will punish bribe-givers with
taps on the wrist, while the United States imposes draconian
penalties?
Lewis: I think that definitely is an issue. The convention itself says
specifically that the penalties must be at least as severe as the
penalties for domestic bribery and they must be dissuasive. They have
to be more than a slap on the wrist. If you have a multibillion dollar
corporation giving a bribe of $50 million, you can't fine it $1,000.
That would not be considered dissuasive under the convention
standards. So we'll take a look at the fines that judges actually hand
out.
Q: You noted that many OECD countries are supporting the anti-bribery
treaty reluctantly. What incentives can the United States offer to get
the other signatories to enforce the treaty?
Lewis: I think the biggest incentive may be enlightened self-interest.
A number of companies are finding that big bribes are eating
substantially into their bottom line. If they felt that none of their
competitors were giving bribes, they would be quite happy not to give
them either, and they've told their governments that. Enlightened
self-interest is probably the best enforcement mechanism you have for
anything, particularly in the international arena where we don't have
bribery police forces to run around and arrest people across borders.
As far as negative leverage, the public diplomacy role is always
available. If countries are blatantly uncooperative, at some point we
can go public. There are some countries in which the local political
dynamics would make that tactic effective.
Q: Are any sanctions contemplated?
Lewis: No, there are no sanctions in the treaty. We're sitting down to
a table of equals and pushing and badgering each other.
Q: Will the World Trade Organization (WTO) be playing a role in
implementing the OECD treaty?
Lewis: Not in implementing this treaty, but the WTO has a very
important role to play with regard to another aspect of the corruption
problem. This treaty is aimed at the supply side, or bribe-givers. We
need the WTO to help us with the demand side, the developing
countries. At the moment, there is nothing regulating them. Most of
the problems occur in government procurements.
Years ago, the WTO set up a government procurement agreement that was
supposed to regulate that area, but they did not make everybody sign
it. As of now, only 25 countries or so belong to it -- mostly the same
rich countries that belong to the OECD. Virtually no developing
country has signed this treaty. The United States has proposed that
the WTO take up something called a "transparency initiative" under
which a government would publicly advertise procurement contracts,
publish standards or criteria for those contracts, and open the bids
publicly. If people object to the decision, they would have a place to
appeal. If the WTO can succeed in that in the next couple of years,
that will be a major contribution to solving this problem. Then we'll
have both halves of the sandwich, the developed countries and the
developing countries.
(end text)